Great Reading. If you have a chance, just go for it. Even though Dr. Kotler and Dr. Armstrong tell us about marketing principles, they are digging into the basics to get us to face the new reality in the market today. It is good to recap and check out their thoughts. First of all, let’s understand what the demographic environment is about. Demography is the study of human populations in size, locations, gender, race, occupation, etc. The Demography environment is of major interest because it involves people. People make up markets since the world is getting crowded and overpopulated, and diversity always leads to opportunities and challenges. Changes in the world demographic environment have major implications for business. Thus, marketers keep a close eye on demographic trends and developments in their markets. They analyze changing age and family structures, geographic populations shift, education, and diversity. However, marketers face another reality; the geographic population is shifting more often, especially in family and structures, a better educated and more white-collars population is increasing diversity. In other words, the economic environment consists of factors that affect buying power and patterns. The economic environment is characterized by more consumer concern for value in shifting consumer spending patterns. Today's squeezed consumers seek greater value -- just the right combination of good quality and service at a fair price. The distribution of income also is shifting. Whether you have read on the Bible, the rich have grown richer, and the poor have remained poor even more. We've seen the middle class has shrunk, leading to a two-tiered market. Many companies now tailor their marketing offers to two different markets the affluent and the less affluent. Secondly, with the population's changing age structure since the birthrates and longer life expectancy, the population is rapidly getting older. This aging of the population will have a significant impact on markets and those who service them. If we take the U.S. population, it contains several generational groups divided into the four largest groups – the baby boomers, Generation X, the Millennials, and Generation Z and their impact on today’s marketing strategies. The Baby Boomers. The post-World War II baby boom produced 78 million baby boomers born between 1946 and 1964. Over the years, the baby boomers have been among the most powerful forces in the marketing environment. The Generation X. The boomers were followed by a “birth dearth, creating another generation of 49 million people born between 1965 and 1976. Author Douglas Coupland calls them Generation X because they lie in the shadow of the boomers. Considerably smaller than the boomer generation that precedes them and the Millennial who follow, the Generation Xers are a sometimes overlooked consumer group. Points for marketers observe are:
From a marketing standpoint, the Gen Xers are a more skeptical bunch. They tend to research products before they consider a purchase, prefer quality to quantity, and be less receptive to overt marketing pitches. They are more likely to be receptive to irreverent ad pitches that make fun of convention and tradition.
Gen Xers are now approaching middle age; they are displacing the baby boomers' lifestyles, cultures, and values. They are the most educated generation to date, and they possess hefty annual purchasing power, but they are spending more carefully. The Millennials or Generation Y. born between 1977 and 2000, these children of the baby boomers number 83 million or more, dwarfing the Gen Xers and becoming larger even the boomers' segment. Millennials are the most financially strapped generation. Facing higher unemployment and saddled with more debt, many of these consumers have near-empty piggy banks. Because of their numbers, the Millennials make up a huge and attractive market, both now and in the future. They have in common is their comfort with digital technology. They don’t just embrace technology; it’s a way of life. They are the first generation to grow up in a world filled with computers, mobile phones, satellite TV, iPods and iPads, and online social media. Consequently, they engage with brands in an entirely new way, such as mobile or social media. More than sales pitches from marketers, they seek opportunities to shape their own brand experience and share them with others. The Xennials (also known as the Oregon Trail Generation and Generation Catalano) are among that class. Xennials is a neologistic term used to describe people born during the Generation X/Millennial cusp years. Generation Z. young people born after 2000. The Gen Zers make up important kids, tweens, and teen markets. For example, U.S. “Tweens”(age 8 to 12) number 20 million girls and boys who spend an estimated $43 billion annually of their own money and influence a total of almost $200 billion of their own and parents’ spending. Besides, these young consumers also represent tomorrow’s markets- they are now forming brand relationships that will affect their buying well into the future. Generation Marketing. Do marketers need to create separate products and marketing programs for each generation? Some experts warn that marketers need to be careful about turning off one generation each time they craft a product or message that appeals effectively to another. Others caution that each generation spans decades of time and many socioeconomic levels. Thirdly, the changing American Family as the traditional household consists of a husband, wife, and children. The two child's historic American ideal, the two-car suburban family, has lately been losing some of its lusters. US married couples with children represent only 19 percent of households today, married couples without children represent 28 percent, single parents are another 18 percent. A full 34 percent are non-family households – singles living alone or unrelated adults of one or both sexes living together. One in 12 married couples is interracial. Marketers must consider nontraditional households' special needs because they are now growing more rapidly than traditional households. Each group has distinctive needs and buying habits. Companies are adapting their marketing to reflect the changing dynamics of American families. Fourthly, Geographic population shifts. This is a period of great migratory movements between and within countries. Americans are mobile people, with about 12 percent of all US residents moving each year and 35 percent or more moving every five years. The US population has shifted toward the Sunbelt states. The West and South have grown. Such population shifts interest marketers because people in different regions buy differently. For example, people in the Midwest buy more winter clothing than people in the Southeast. Fifthly, a better-educated, more white-collar, and more professional population, the US population is becoming better educated. In the last 30 years, Americans have earned much more education. About 88 percent over age 25 had finished high school, and 32 percent had a bachelor’s degree, compared with 66 percent and 16 percent, respectively. The Workforce also is becoming more white-collar. Job growth is now strongest for professional workers and weakest for manufacturing workers. The next decade is projected fastest employment growth, and over half of them will require post-secondary education. The rising number of educated professionals will affect not just what people buy but also how they buy. Sixth, increasing diversity, countries vary in their ethnic and racial makeup. For example, in Japan, where almost everyone is Japanese. People from many nations and cultures have melted into a single, more homogeneous whole in the USA. Marketers now face increasingly diverse markets, both at home and abroad, as their operations become more international in scope. According to U.S. Census Bureau, the US population is about 64 percent white, with Hispanics at almost 17 percent (Hispanics associations defend over 20 percent**) and African American at just 13 percent. Asian American population now totals more than 5 percent of the total US population, with the remaining 1 percent being Natives (originals Americans). By 2050, Hispanics will be more than 30 percent of the US population; Afro-Americans will be 15 percent, and Asians 8 percent. **(frightened with the Census questionnaires, Hispanics have been misleading information about their origins). This scenario has made large companies target especially designed products, ads, and promotions to one or more of these groups. Economic Environment consists of economic factors that affect consumer purchasing power and spending pattern. Marketers must pay close attention to major trends and consumer spending patterns across and within their world markets. Also, nations vary greatly in their levels and distribution of income. Some countries have industrial economies, which constitute rich markets for many different kinds of goods. Changes in consumer spending, economic factors affect consumer spending and buying behavior. Consumers have now adopted a back-to-basics sensibility in their lifestyles and spending patterns that will likely persist for years to come. Income distribution, marketers should pay attention to this subject as well as income levels. Over the past several decades, the rich have grown richer, the middle class has shrunk, and the poor have remained poor. The top 5 percent of American earners get over 22 percent of the country’s adjusted gross income, and the top 20 percent of earners capture 51 percent of all income. In contrast, the bottom 40 percent of American earners get just 11.5 percent of the total income. Changes in major economic variables, such as income, cost of living, interest rates, and savings and borrowing patterns, greatly impact the marketplace. Companies watch these variables by using economic forecasting. Businesses do not have to be wiped out by an economic downturn or caught short in a boom. With adequate warning, they can take advantage of changes in the economic environment. In conclusion, marketers must observe the demographic environment, such as the changing age structure of populations, the population's geographic shifts, and the population's diversity. When you market a product, you have to market it to the right people and target audience in that specific area. Indeed marketers must pay close attention to the economic environment, such the consumer spending, income distribution, because these have a large impact on the marketplace because of the consumer buying habits. In other words, changes in the demographic and economic environments definitely affect marketing decisions. Thus, have a good read. References: 1. Philip Kotler, Ph.D. - MIT - Analyzing the Marketing Environment - The Demographic Environment 2. Gary Armstrong Ph.D. - Northwestern University - Analyzing the Marketing Environment - The Economic Environment. |
Which of the following consists of economic factors that affect purchasing power and spending patterns?
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